What are the advantages and disadvantages of common stocks?
Answers
Answer:
The main advantage of this type of share structure is that owners get access to the capital markets, while retaining effective control and potentially warding off hostile takeovers. The disadvantage for investors is lower voting rights and trading volumes in some of these share classes.
Common Stock Advantages
As part owners, common stockholders have some say in company operations. For example, they elect directors and vote on resolutions, such as the approval of auditors' reports and mergers and takeovers.
Common Stock Disadvantages
The stock markets can be volatile with frequent price swings of several percentage points in a single trading session. Your portfolio could lose substantial value in a short period. If you are trading on margin, this could mean margin calls and the forced liquidation of stocks at significant losses.